In January 2018, I dipped my toes into passive real estate investments and decided to allocate a portion of my funds to a diversified portfolio of projects with Fundrise. Now, after five years, I am more than confident in sharing my Fundrise review.
Fundrise Stands Out: Accessibility and Diversification
One of the standout features of Fundrise is its accessibility. Unlike many other investment platforms, Fundrise does not require you to be an accredited investor. With as little as $10, you can start investing in their funds, and they even match your initial investment with $10 in bonus shares. While they won't match larger investments, this is still a generous offer to get you started.
Moreover, instead of investing in individual projects, Fundrise offers eREITs, which are funds that hold a diverse range of projects with varying risk and return profiles. This approach allows for greater diversification and minimizes the risk associated with investing in a single project.
Fundrise Returns: A Promising Track Record
Let's get straight to the point: can you make money with Fundrise? My personal experience says yes.
Over the course of five years, I have achieved a total return of 59%. When accounting for timing of cash flows, this translates to an annualized internal rate of return (IRR) of 10.8%. To put it into perspective, an IRR of 10.8% would double your money in 6 to 7 years, which is comparable to long-term stock market returns. However, it's important to note that past results do not guarantee future returns. While I have been satisfied with my investment's performance, I cannot guarantee similar returns over the next few years.
While the returns I've seen with Fundrise are good, they fall slightly below the average IRR of fully realized deals on other real estate investment platforms. Nonetheless, it is worth considering that Fundrise takes a more conservative approach, which may contribute to the slightly tempered returns.
Fundrise Risk Profiles: Diversification and Stability
Investing in a single real estate project involves a higher risk, as there is a chance of losing 100% of your capital. With Fundrise, this risk is minimized as you invest in multiple projects through their funds. While there is still a possibility of loss, the diversified nature of the investments provides a level of stability that individual investments cannot.
My own funds are allocated across four Fundrise funds: East Coast eREIT, Heartland eREIT, West Coast eREIT, and the Flagship Real Estate Fund. These funds collectively hold around 100 different projects, providing broad exposure to the real estate market.
The projects are spread throughout the United States, with a significant focus on states with milder climates. They encompass a mix of Value Add, Core Plus, Fixed Income, and Opportunistic deals, allowing for a balanced risk-reward profile.
Fundrise Account Levels: Advancing Your Investment Journey
If you want to take your investment to the next level, Fundrise offers various account levels based on your investment commitment.
Starting with a Starter account, which can be opened with just $10, you can invest in the Flagship Real Estate Fund. Beyond that, there are four more account levels: Basic ($1,000 investment), Core ($5,000 investment), Advanced ($10,000 investment), and Premium ($100,000 investment). Each level unlocks additional benefits, such as access to different funds and priority customer support.
Fundrise Flexibility: Liquidity and Automation
Investing in alternative assets requires considering your liquidity options. With Fundrise, the process is straightforward. You can withdraw investments in the Flagship Real Estate Fund or Income Fund without any penalties. However, if you withdraw from the eREITs or eFund within five years of holding the assets, a fee of around 1% applies. After the five-year mark, there are no fees for withdrawal.
Fundrise's ongoing fees are also quite competitive, amounting to 1% annually. This is relatively low compared to other investment platforms in this space.
While withdrawal requests are reviewed on a quarterly basis, it's important to keep in mind that it may take time to process your request. Additionally, Fundrise offers the flexibility to automate your investments. You can choose to invest a certain amount at regular intervals, reinvest dividends and distributions, or customize your investment schedule according to your preferences.
Fundrise Taxes: Efficiency and Options
When it comes to taxes, Fundrise offers tax-efficient options. For Core account level investors, you will receive a 1099-DIV each year. The distributions you receive are reported as a mix of Box 3 (Nondividend distributions) and Box 5 (Section 199A dividends). Both categories have favorable tax implications. Return of capital (Box 3) is not taxable, and Section 199A dividends qualify for a 20% QBI deduction if you meet the criteria.
Investors in the Fundrise eFund will receive a K-1 for tax reporting, which is designed to provide even more tax efficiency.
Fundrise Review Summary: A Steady and Promising Investment
In summary, Fundrise offers a reliable and accessible platform for passive real estate investing. While it may not provide home runs, it delivers consistent returns with low volatility thanks to its diversified portfolio.
If you're interested in getting started, you can invest with as little as $10 today, and for a limited time, you'll receive $10 worth of bonus shares. By creating an account through our referral links, you will also support our mission, for which we are grateful.
To learn more about Fundrise and explore your investment options, visit their website.